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Abstract

We examine the frequency of price changes for 350 categories of goods and services covering about 70% of consumer spending, based on unpublished data from the BLS for 1995 to 1997. Compared with previous studies we find much more frequent price changes, with half of prices lasting less than 4.3 months. The frequency of price changes differs dramatically across categories. We exploit this variation to ask how inflation for 'flexible-price goods' (goods with frequent changes in individual prices) differs from inflation for 'sticky-price goods' (those displaying infrequent price changes). Compared to the predictions of popular sticky price models, actual inflation rates are far more volatile and transient, particularly for sticky-price goods. The data appendix for this paper can be found at http://www.nber.org/data-appendix/w9069/

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9069.

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Date of creation: Jul 2002
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Handle: RePEc:nbr:nberwo:9069

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Find related papers by JEL classification:

• E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
• E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

This paper has been announced in the following NEP Reports:

• NEP-ALL-2002-07-21 (All new papers)
• NEP-CBA-2002-07-21 (Central Banking)
• NEP-MAC-2002-07-21 (Macroeconomics)
• NEP-PKE-2002-07-21 (Post Keynesian Economics)

References

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1. Bernanke: Inflation Expectations and Inflation Forecasting
   by Mark Thoma in Economist's View on 2007-07-10 20:08:00
2. On the dispersion in price rigidities
   by Economic Logician in Economic Logic on 2008-09-05 16:15:00
3. Prices are not rigid
   by Economic Logician in Economic Logic on 2008-03-12 17:51:00

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